Unemployment rate: How low can it go?

NEW YORK (CNNMoney) -- The unemployment rate has fallen dramatically over the last six months, but just how low can it go?

The answer is being debated among two camps of prominent economic thinkers. One school of thought says that unemployment will return to around 5% as the economy eventually recovers. But an opposing view states that permanent changes in the labor market mean higher unemployment is here to stay.

The U.S. lost 4.3 million jobs in President Obama's first 13 months in office. Track his progress since then.

Among those who believe the first, more optimistic scenario is Federal Reserve Chairman Ben Bernanke. He thinks that unemployment will fall as part of the regular business cycle, and stimulative policies that boost demand could bring us back to a more normal unemployment rate of between 5% and 6% some time after 2014.

There's plenty of research to back that up. A recent report by economists at Harvard, the San Francisco Federal Reserve and the International Monetary Fund suggests thatthree-quarters of the sharp rise in unemployment during the financial crisis was in fact due to cyclical, not permanent, factors.

And unemployment has indeed fallen sharply as the economy has slowly recovered from the recession. As of March, the unemployment rate stood at 8.2%, a substantial drop from 10% at the height of the financial crisis.

Under the second, far less rosy scenario, 5% unemployment is out of reach. Devotees of "structural" unemployment, believe permanent shifts mean the job market may never fully recover, even as the broader economy does.

The Congressional Budget Office predicts that the unemployment rate will eventually fall as low as 5.3%, but not until 2021. Economists at Goldman Sachs, however, estimate that due to structural reasons the new normal unemployment rate may now be 6% at best.

The biggest wild card that could shift that balance is the long-term unemployed. Of the 12.8 million Americans who are unemployed, 42.6% have been out of work for six months or more.

"If progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further possibly converting a cyclical problem into a structural one," Bernanke said last week.